Jobless Rate Falls, but So Do Payrolls
American employers cut payrolls for the first time in five months, but the nation’s jobless rate still fell to 5.6% in September, the Labor Department reported Friday. The report left analysts puzzled over which way the economy is headed.
Some economists said that the tenth-of-a-point drop from August, together with an upward revision of August’s job gains from 39,000 to 107,000, showed an economy on the mend.
But others said the loss of 43,000 jobs last month and an increase in the number of long-term unemployed, meaning those out of work for six months or more, suggest that growth is faltering.
“The labor market is in a holding pattern; the economy is moving sideways,” said Princeton University economist Alan B. Krueger.
The muddled picture is likely to have some immediate effects. What strength there was in the new numbers could convince the Federal Reserve that there is no immediate need to cut interest rates further. And it complicates efforts of congressional Democrats to extend a program due to expire Dec. 28 that gives the jobless 13 weeks of extra unemployment benefits.
The new numbers appeared to baffle investors, who initially took them as good news and drove stock prices higher, then lost heart and sent prices back down again. The Dow Jones industrial average fell 188.79 points, or 2.5%, to close at 7,528.40, its lowest close in almost five years. Other major market indexes posted similar declines.
The most widely watched numbers in the jobs report appeared to barely budge in September. The number of unemployed workers slipped slightly from 8.14 million in August to 8.09 million last month. The unemployment rate for blacks remained unchanged at 9.6%. The rate for Latinos slipped a tenth of a point to 7.4%.
But a variety of analysts saw signs of weakness behind the new numbers and warned that the economy may be headed for another “jobless” recovery like that of the early 1990s.
Even President Bush appeared worried. In Boston for a GOP fund-raiser, the president said, “The unemployment rate dropped, which was good news. But that’s not good enough. There are still too many people who wonder whether or not they’re going to be able to find employment.”
Though not particularly large, the loss of 43,000 jobs in September snapped a four-month streak of job growth and included steep new declines in manufacturing.
U.S. factories cut payrolls by 63,000 in August and an additional 35,000 last month. The declines stretched job losses in the manufacturing sector into a third year and boosted the loss total to 1.9 million.
Airlines cut 12,000 workers last month. Retailers, who were thought to have been profiting from consumers’ willingness to keep buying, reduced payrolls by 16,000.
Among the few industries to add workers in September were health care (21,000) and, because of the refinancing boom, mortgage banking (9,000). The federal government added 11,000, most of them airport security guards.
Overall, private employment has shrunk by 200,000 since December, when most analysts think the economy emerged from recession, according to Labor Department statistics.
On a positive note, the average workweek for production and nonsupervisory employees, who make up almost 80% of the nation’s labor force, rose two-tenths of an hour, and average hourly wages climbed 5 cents to $14.87. But during the last year, hourly wages have grown only 3%, their slowest annual pace since early 1996.
Analysts were troubled by an increase from 16.2 weeks to 17.8 weeks in the average length of time unemployed workers are out of a job, and by a jump from 18.2% to 19% in the percentage of the jobless who are out of work for six months or more.
Most economists had expected the September unemployment rate to rise to 5.9% or 6%, rather than fall. They were taken by surprise by the 5.6% rate announced by the Labor Department.
But some analysts labeled the decline a fluke and evidence of a serious problem in the way the nation keeps tabs on its labor markets. The Labor Department relies on two surveys--one of households and the other of employers--that often produce drastically different results.
Last month, for example, the household survey showed that the economy had added 711,000 jobs, while the more reliable employer survey showed it had lost 43,000.
“These numbers don’t tell a coherent story,” said William Cheney, chief economist at John Hancock Mutual Life Insurance Co. in Boston.
